Yield on 2-Year Treasury Remains Above 5% Ahead of Jerome Powell’s Comments

Market Update

  • The yield on the 2-year Treasury (BX:TMUBMUSD02Y) closed at 5.04%, recording an increase of 2.3 basis points.
  • Yields and prices move in opposite directions, making the 2-year security highly sensitive to changes in Fed interest-rate expectations.
  • The yield on the 10-year Treasury (BX:TMUBMUSD10Y) ended at 4.25%, showing a slight rise of 0.4 basis points.
  • The yield on the 30-year Treasury (BX:TMUBMUSD30Y) settled at 4.31%, increasing by 0.1 basis points.

What’s Behind the Market Activity

Financial markets eagerly anticipate Federal Reserve Chair Jerome Powell’s upcoming speech at the Jackson Hole Symposium in Wyoming on Friday at 10:05 a.m. Eastern Time. Investors are keen to gain insights not only into the possible actions of the Fed in the coming months but also its long-term strategy.

During Thursday’s talks, Fed officials hinted at the likelihood of future rate hikes; however, they suggested that September may not be the month for such a move.

There is speculation that Powell might address the Fed’s “neutral” or “r-star” rate and whether it has experienced an upward shift.

Alex Pelle, U.S. economist at Mizuho Securities, predicts that Powell’s remarks will highlight a data-dependent and risk management approach. Pelle also expects Powell to emphasize the Fed’s commitment to achieving 2% inflation. However, Pelle does not foresee Powell signaling the conclusion of the tightening cycle or making any bold statements about a regime shift in interest rates.

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